Papers by Sanchita Basu Das
The idea of a ‘single market and production base’ in the ASEAN Economic Community (AEC) is to pro... more The idea of a ‘single market and production base’ in the ASEAN Economic Community (AEC) is to provide ASEAN consumers with more choices of goods at lower prices and offer regional producers more space for production activities. ASEAN Member Countries (AMCs) have made progress in reducing
average tariffs to less than one per cent for regional trade. Indeed, the tariff related AEC deadlines were met in 2012, when 99.1 per cent of the tariff lines of the ASEAN-6 carried zero per cent duty. However, issues remain over the utilisation rate of Common Effective Preferential Tariff (CEPT) preferences. In 2005-2010, this rate ranged from a low of 0.5 per cent for Myanmar to a modest 22.6 per cent for Thailand
and a high of 47 per cent for the Philippines. In addition, while tariffs have come down, non-tariff barriers (NTBs) continue to prevail in the region. The industries most affected by NTBs are the chemical, machinery, and electrical sectors. These barriers, both at the border and behind-the-border, are used as policy tools by AMCs to protect domestic interest groups. NTBs are most prevalent in Indonesia, followed by Vietnam. The ineffectiveness of NTB reform can be attributed to ASEAN’s way of dealing with the issue – voluntary declaration and the
absence of mechanisms of verification. As a whole, AMCs have collectively benefitted, albeit in a limited way, from its action of tariff reduction and regular discussions on NTBs. In addition,
AMCs’ ‘open regionalism’ has helped integration by creating trade rather than diverting it. As such, ASEAN’s economic regionalism is viewed as a ‘building block’ rather than a ‘stumbling block’ towards the multilateral world trading system. Going forward, key policy recommendations are: generating and maintaining political will for economic integration; generating greater awareness about the pervasiveness and impact of NTBs; streamlining NTBs and harmonising them with existing international databases;
increasing public AMC outreach activities with respect to AEC and its benefits; and pushing for domestic reforms in smaller economies such as Cambodia, Laos, Myanmar, and Vietnam.
With the deadline of 31 December 2015 looming ever closer, there areincreasing discussions on the... more With the deadline of 31 December 2015 looming ever closer, there areincreasing discussions on the form and bearing of the ASEAN EconomicCommunity (AEC) on labour markets. AEC’s impact on the region’s employment prospects comes from two channels—first from the structural changes in domestic economies; and second from theAEC’s promotion of free movement of skilled labour through the establishment of Mutual Recognition Arrangements (MRAs) of professional services. With structural change overtime, the AEC can potentially boost the region’s GDP by 7.1 per cent by 2025 and generate 14 million jobs in the process. However, the gains will not be evenly distributed across countries, sectors or skill groups. It should be noted that structural shifts in domestic economies and their impact on labour markets will take time to materialize and it is expected to happen only when other AEC measures of trade, investment and connectivity have been carried out effectively. As for the MRAs, although they have been signed for seven professions, their effectiveness in promoting greater flows of professional services within the region is negligible, as the individual economies are yet to align their domestic rules and regulations to the regional initiative. Although the changes in the labour market will take time to materialise, policymakers need to start preparing for them now. No doubt, AEC will result in higher welfare, wages, and employment, but the benefits will be distributed unevenly, increasing existing inequalities. To address this, coordinated and coherent policies will be needed at both regional and national levels to ensure inclusive and fair outcomes. For MRAs to work effectively, much will depend on unilateral actions of member economies and their willingness to change domestic laws to facilitate the movement of professionals. Even if these happen, policy makers will subsequently need to clearly communicate their policy directions and convince their professional bodies to share the same objective and vision.
Asia has been leading the world’s economic growth for the past decade with the development of int... more Asia has been leading the world’s economic growth for the past decade with the development of international production networks as one of its key strengths. For sustained growth, the production fragmentation process is only profitable if the cost
of transporting intermediate goods across borders is low in terms of time and money and this can be facilitated with better infrastructure. However, most Asian countries suffer from infrastructure deficiencies. The region, in general, also remains below the world average in terms of quantity and quality of infrastructure. There exist wide gaps among the economies with regard to the trade facilitation and institutional processes.
The 2010 Master Plan of ASEAN Connectivity has focused on infrastructure development, i.e. physical, institutional, and people-to-people connectivity; and similarly, APEC, under Indonesia’s Chairmanship in 2013, has set connectivity as one of its priorities. How these organisations implement the connectivity projects will be keenly watched. This is important as (i) intra-regional economic activities in Asia and the Pacific are likely to increase with time, and (ii) ASEAN and APEC have substantial developmental differences among its member states which offers opportunities for expanding their production networks. ASEAN and APEC are looking for economic integration by 2015 and 2020 respectively,
and this needs to be supported through the building of physical infrastructure, the promoting of trade facilitation and an increase in people-to-people interaction.
Between 2010 to 2020, Asia needs to invest a total of around US$8 trillion in overall national in... more Between 2010 to 2020, Asia needs to invest a total of around US$8 trillion in overall national infrastructure and an additional US$287 billion in specific regional infrastructure projects (ADB/ADBI 2009). Financing such national and cross-border infrastructure projects for economic integration in the Asia-Pacific region is challenging and complicated. In general,
there are several sources of infrastructure finance -- Government Budget, Multilateral Development Banks, Commercial Bank Credit, Capital Markets, Sovereign Wealth Funds and Public-Private-Partnership. But each of these
has its own features and certain limitations. While national government budgets will continue to be the mainstay for financing infrastructure, it will need to be supplemented by Multilateral Development Banks in the future. Asian governments must put their collective work to mobilize their large pool of savings for regional infrastructure investments. Strengthening national and regional bond markets—through vehicles like the Asian Bond Market Initiative and the Asian Bond Funds— is one of the few steps in narrowing the infrastructure
financing gap. The Asian region’s forex reserve, including those in
the Sovereign Wealth Funds, could also play an important role.
• Public-Private Partnership may play a bigger role in the near future. What is
needed is substantial work to address the challenges to build and implement
the PPP models. Asian governments need to act together and develop ‘bankable’
projects for attracting the private sector.
ASEAN and APEC share many goals and priorities in promoting economic and developmental cooperatio... more ASEAN and APEC share many goals and priorities in promoting economic and developmental cooperation in Southeast Asia and the wider Pacific region. Connectivity is one of these. ASEAN endorsed the Master Plan on ASEAN Connectivity in 2010, while APEC, under Indonesia’s Chairmanship in 2013, is looking at components similar to this plan. To avoid duplication and to optimize on limited resources, APEC has highlighted
seven areas for possible collaboration with ASEAN — supply chain connectivity, trade facilitation, investment, disaster management, structural reform, food security and SMEs. But challenges persist. ASEAN wants to ensure its pivotal role in regional economic integration but feels threatened by the US policy to promote APEC or TPP. Moreover, at this moment, ASEAN’s participation in APEC is limited because three of its members — Myanmar, Cambodia, and Laos — are not part of APEC. With uncertainty in the West, cooperation in Asia is likely to gain importance. Cooperation amongst Asian neighbours can play the role of ‘bridge builder’ between individual Asian economies with the rest of the world. This can reduce disparities in income and have positive spillover effects for technological development, energy security, disaster preparedness and other critical areas.
On 31st December 2015, the ten ASEAN member states will jointly announce the establishment of the... more On 31st December 2015, the ten ASEAN member states will jointly announce the establishment of the ASEAN Economic Community (AEC). At present, these states have yet to fulfil all the stipulated targets stated in the AEC Blueprint. This Blueprint ultimately aims for an integrated market and a production base that allow for free movement of goods, services and skilled labour, as well as freer movement of capital. One explanation for their shortcoming is the conflicting interests existing within the domestic economy. These generally involve technical, human and financial constraints; national priorities; bureaucratic complexities; preference for unilateral liberalization; differing interests among industry players; as well as lack of coherence in government policies. What is needed to enhance the AEC beyond 2015 are improvements in four key areas: a) greater policy coherence in domestic economies; b) increased stakeholder consultation; c) identifying winners and losers to mitigate the negative impact on domestic stakeholders; and d) overcoming resource constraints.
As ASEAN member economies start their discussion on the ‘deepening’ of economic integration, an A... more As ASEAN member economies start their discussion on the ‘deepening’ of economic integration, an ASEAN Customs Union (CU) may become a possibility. Given that Singapore already operates a zero tariff regime on trade in goods there are two options for ASEAN in moving towards a CU: either all its members will need to inch closer to a zero Common External Tariff (CET), or they will have to form a CU with a
positive CET minus Singapore. The latter would however mean that the customs union would only be a partial one. The trend in ASEAN’s intra-regional tariff protection suggests that while member countries have achieved a free trade agreement, the grouping’s move towards a customs union will require
them to eventually implement a low positive CET for non-ASEAN members. According to our modelling exercise, the creation of a partial ASEAN CU with a positive CET of between 2-5 percent demonstrates that while there may be net benefits for ASEAN as a whole, some members may not gain from it. A CET of 0 percent shows that ASEAN-9 members overall will gain in terms of GDP, while Singapore will experience a
negative GDP growth due to potential intra-regional trade diversion. However, the modelling does not capture Singapore’s entrepot trade characteristics and comprehensive
nature of trade agreements that may affect the results positively. Promoting deeper regional integration like the ASEAN CU also entails significant challenges in terms of: tariff peaks and divergence; gaps in beyond-the-border and
regulatory measures; a trade diversion risk for Singapore; as well as political economy challenges due to ASEAN’s unique characteristics and differing levels in economic development. Despite the challenges, an ASEAN CU with more unifying and coherent commercial policies could be considered by ASEAN leaders post-2015. It could be visualised as a form of deeper integration that will not only help strengthen ASEAN’s single market objective, but also further the organisation’s strategic objectives.
ASEAN Leaders have repeatedly shown interest to achieve an ASEAN Economic Community (AEC) by 2015... more ASEAN Leaders have repeatedly shown interest to achieve an ASEAN Economic Community (AEC) by 2015. But it is highly unlikely that ASEAN can refer itself as an effective ‘Economic Community’ i.e. a community where ASEAN businesses and citizens are able to benefit in terms of lower costs and better job opportunities. Although tariffs have been reduced and agreement like Trade in Goods is in place, there are many non-tariff barriers in the region. The trade facilitation measure of the National Single Window is said to suffer from lack of coordination between agencies or lack of appropriate human resource for most of the member countries. ASEAN is yet to reduce transportation and logistics costs between and within member economies. Despite endorsing the ASEAN Comprehensive Investment Agreement (ACIA) in 2012, ASEAN countries lack domestic reforms and this limits the FDI flows in the region. ASEAN countries continue to suffer from the issue of development divide. The business community, as one of the final beneficiaries, is yet to have full awareness on AEC matters. Despite all these issues, ASEAN economic integration efforts seem difficult to derail. As time is running fast, the ASEAN countries, are trying earnestly to implement the ‘core’ elements of integration by 2015. These are the measures that are expected to have high impact in the region. The region is also trying to play a role of “bridge builder” between countries in the greater scope of Asia. While some of the aspirations of ASEAN economic cooperation would be met by end-2015, rest will be carried forward beyond that.
The ASEAN Economic Community (AEC) is both an economic and strategic initiative. As an economic p... more The ASEAN Economic Community (AEC) is both an economic and strategic initiative. As an economic project, the AEC is expected to achieve its objective of a single market by end-2015. Although ASEAN has achieved 82.1 per cent of its targets, it has not yet reached its end-goal since both border and beyond-the-border restrictions continue to prevail in the region. The elimination of such restrictions is likely to be
the most important task if ASEAN intends to move towards a single market space in the future. As a strategic project, the AEC is conceived to help member states pursue their national interests. Economic cohesion is expected to help the 10 small economies during times of economic vulnerabilities, to deliver on a bigger market space of 600 million people to attract FDI, and to play the role of a ‘hub’ in the larger Asian region. In addition, economic coherence is likely to strengthen the member states’ bargaining power in the WTO and in their collective negotiating position for FTAs and other strategic matters. The AEC’s achievement as a strategic project can be observed in ASEAN states’ increasing level of FDI; cooperative stance during the 2008 crisis; positive behaviour in dealing with the international community; and increasing belief in maintaining centrality. Going forward, the AEC process will continue, not just for its economic benefits of
lowering trade and investment costs in the region, but also for managing ongoing economic and geopolitical uncertainties.
The article attempts to explain five facts about the ASEAN Economic Community (AEC). The AEC was ... more The article attempts to explain five facts about the ASEAN Economic Community (AEC). The AEC was not developed on the basis of the European Union (EU) model, though there are some learning experiences to be gleaned from this process. For ASEAN governments, the AEC is a gradual process with long term aspirations and is pursued in areas where it is felt necessary. Although AEC is a regional initiative, its implementation is carried out by the national economies. At the national level, implementation faces difficulties as each initiative is not the sole preserve of any one ministry, but rather multiple government ministries and other
agencies. In the domestic economy, the AEC also generates proponents and opponents of integration, slowing down the pace of implementation further. AEC is not the sole cause of increasing competition. For any single country, heightened
competition is a part of the globalisation process and there are other frameworks too -bilateral, regional and multilateral - that further economic integration. ASEAN economic cooperation is a top-down initiative and hence awareness among
stakeholders is low and uneven. With the looming deadline of 2015, voices from the private sector have begun to be heard. However, the advocacy for trade initiatives is not unanimous in nature and is often driven by the relative strength of particular firms that bring in more foreign direct investment to the country. AEC should be seen in conjunction with the ASEAN Political-Security Community and ASEAN Socio-Cultural Community. As a result, it should not be seen in isolation when
judging whether ASEAN can deliver on its community-building commitments.
Globalisation has increasingly made economic diplomacy a key component of foreign policy. Since p... more Globalisation has increasingly made economic diplomacy a key component of foreign policy. Since production decisions made by Transnational Corporations (TNCs) are influenced by various domestic factors, the role of host governments has become more important for example in keeping transaction costs low. Participating in free trade agreements (FTAs) that go beyond trade in goods and services to include non-tariff barriers, government procurement, competition policy, and intellectual property protection is one key mechanism for keeping such costs low and through this attract foreign direct investment (FDI). FTAs involving ASEAN countries have introduced a structured and government-to-government form of cooperation that is redefining the balance of economic power. This can be observed in the growing number of such arrangements, and symbolises not only greater economic opportunity but also closer political ties. ASEAN states have adapted to this new trend of diplomacy at four levels (global, trans-regional, regional and bilateral) and its related strategic and political alignments. The positive effects of growing ASEAN economic diplomacy, in addition to lowering business costs, are also observed in technology and skills transfer and infrastructure investment. Economic diplomacy is said to have its advantages. It generates higher economic growth, efficiency, transparency and ease of doing business in a country. However, its benefits face risks as well — issues of non-traditional security, China using its growing economic leverage in territorial disputes, rising nationalistic sentiments and other political-economic issues. Going forward, one should note that economic diplomacy is a dynamic process that changes with new realities. It is a pursuit of all countries, provided they grow at a robust pace. However, to succeed in economic diplomacy, a country needs a skilled pool of policy makers and private sector actors who can understand and negotiate key economic and trade issues. For the ASEAN economies, assuming the status quo, as long as they continue to deliver on robust economic growth and there is a cooperative stance towards each other, economic diplomacy can be seen as a ‘positive-sum’ game in the years to come.
ASEAN will require a new economic community vision beyond 2015, given the changing nature of the ... more ASEAN will require a new economic community vision beyond 2015, given the changing nature of the region’s political economic landscape. Such a new vision, suggestively called AEC 2025, needs to be based on ASEAN’s own strengths and weaknesses. The present slowdown in the US and the EU markets, growing competition from China and possibly India will convince ASEAN to hasten economic cooperation among its members. This will offer opportunities for foreign investors. AEC 2025 should aim for an economically desirable, politically acceptable and developmentally achievable region. It should aspire to increase productivity, enhance connectivity, liberalize services sector, give due attention to the PPP model of regional investment, deepen financial sector cooperation and seek new FTA partners.
• The new vision needs to address cross-cutting issues such as good governance, stronger institutions, and a transparent economic scorecard. In delivering on its promises by 2025, ASEAN should be able to build up on its credibility and maintain its centrality in the FTA structure of the Asia-Pacific in the long run.
Asean Economic Bulletin, 2009
This special issue of ASEAN Economic Bulletin zeroes in on the challenges faced by one of the eme... more This special issue of ASEAN Economic Bulletin zeroes in on the challenges faced by one of the emerging ASEAN economies, Vietnam. Vietnam, which was hailed as a miracle economy in the recent years, came under severe pressure in 2008. Inflation rose, real estate market ...
Books by Sanchita Basu Das
The term ‘Middle-Income Trap’ refers to countries which stagnate economically after reaching a ce... more The term ‘Middle-Income Trap’ refers to countries which stagnate economically after reaching a certain level of per capita income on the basis of labour- and capital-intensive growth, and are struggling to transition towards more skill-intensive and technology-driven development. It has resonance for the increasing number of countries in Asia who have either languished in middle-income status for extended periods of time, or are worried about growth slow-downs.
This book sets outs the conceptual underpinnings of the Middle-Income Trap and explores the various ways it can be defined. It also focuses on the debate surrounding the Middle-Income Trap which questions the appropriate institutional and policy settings for middle-income countries to enable them to continue past the easy phase of economic growth. The book engages with this debate by investigating the role of institutions, human capital, and trade policy in helping countries increase their income levels and by highlighting factors which enable the shift to higher and qualitatively better growth. It questions how the large emerging economies in Asia such as China, Indonesia, and India are currently grappling with the challenges of transitioning from labour-intensive to technology- and knowledge-intensive production, and discusses what can be learnt from the countries that have been able to escape the trap to attain high-income status.
Providing a conceptual framework for the Middle-Income Trap, this book will be of interest to students and scholars of Asian Economics, Comparative Economics and Asian Studies.
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Papers by Sanchita Basu Das
average tariffs to less than one per cent for regional trade. Indeed, the tariff related AEC deadlines were met in 2012, when 99.1 per cent of the tariff lines of the ASEAN-6 carried zero per cent duty. However, issues remain over the utilisation rate of Common Effective Preferential Tariff (CEPT) preferences. In 2005-2010, this rate ranged from a low of 0.5 per cent for Myanmar to a modest 22.6 per cent for Thailand
and a high of 47 per cent for the Philippines. In addition, while tariffs have come down, non-tariff barriers (NTBs) continue to prevail in the region. The industries most affected by NTBs are the chemical, machinery, and electrical sectors. These barriers, both at the border and behind-the-border, are used as policy tools by AMCs to protect domestic interest groups. NTBs are most prevalent in Indonesia, followed by Vietnam. The ineffectiveness of NTB reform can be attributed to ASEAN’s way of dealing with the issue – voluntary declaration and the
absence of mechanisms of verification. As a whole, AMCs have collectively benefitted, albeit in a limited way, from its action of tariff reduction and regular discussions on NTBs. In addition,
AMCs’ ‘open regionalism’ has helped integration by creating trade rather than diverting it. As such, ASEAN’s economic regionalism is viewed as a ‘building block’ rather than a ‘stumbling block’ towards the multilateral world trading system. Going forward, key policy recommendations are: generating and maintaining political will for economic integration; generating greater awareness about the pervasiveness and impact of NTBs; streamlining NTBs and harmonising them with existing international databases;
increasing public AMC outreach activities with respect to AEC and its benefits; and pushing for domestic reforms in smaller economies such as Cambodia, Laos, Myanmar, and Vietnam.
of transporting intermediate goods across borders is low in terms of time and money and this can be facilitated with better infrastructure. However, most Asian countries suffer from infrastructure deficiencies. The region, in general, also remains below the world average in terms of quantity and quality of infrastructure. There exist wide gaps among the economies with regard to the trade facilitation and institutional processes.
The 2010 Master Plan of ASEAN Connectivity has focused on infrastructure development, i.e. physical, institutional, and people-to-people connectivity; and similarly, APEC, under Indonesia’s Chairmanship in 2013, has set connectivity as one of its priorities. How these organisations implement the connectivity projects will be keenly watched. This is important as (i) intra-regional economic activities in Asia and the Pacific are likely to increase with time, and (ii) ASEAN and APEC have substantial developmental differences among its member states which offers opportunities for expanding their production networks. ASEAN and APEC are looking for economic integration by 2015 and 2020 respectively,
and this needs to be supported through the building of physical infrastructure, the promoting of trade facilitation and an increase in people-to-people interaction.
there are several sources of infrastructure finance -- Government Budget, Multilateral Development Banks, Commercial Bank Credit, Capital Markets, Sovereign Wealth Funds and Public-Private-Partnership. But each of these
has its own features and certain limitations. While national government budgets will continue to be the mainstay for financing infrastructure, it will need to be supplemented by Multilateral Development Banks in the future. Asian governments must put their collective work to mobilize their large pool of savings for regional infrastructure investments. Strengthening national and regional bond markets—through vehicles like the Asian Bond Market Initiative and the Asian Bond Funds— is one of the few steps in narrowing the infrastructure
financing gap. The Asian region’s forex reserve, including those in
the Sovereign Wealth Funds, could also play an important role.
• Public-Private Partnership may play a bigger role in the near future. What is
needed is substantial work to address the challenges to build and implement
the PPP models. Asian governments need to act together and develop ‘bankable’
projects for attracting the private sector.
seven areas for possible collaboration with ASEAN — supply chain connectivity, trade facilitation, investment, disaster management, structural reform, food security and SMEs. But challenges persist. ASEAN wants to ensure its pivotal role in regional economic integration but feels threatened by the US policy to promote APEC or TPP. Moreover, at this moment, ASEAN’s participation in APEC is limited because three of its members — Myanmar, Cambodia, and Laos — are not part of APEC. With uncertainty in the West, cooperation in Asia is likely to gain importance. Cooperation amongst Asian neighbours can play the role of ‘bridge builder’ between individual Asian economies with the rest of the world. This can reduce disparities in income and have positive spillover effects for technological development, energy security, disaster preparedness and other critical areas.
positive CET minus Singapore. The latter would however mean that the customs union would only be a partial one. The trend in ASEAN’s intra-regional tariff protection suggests that while member countries have achieved a free trade agreement, the grouping’s move towards a customs union will require
them to eventually implement a low positive CET for non-ASEAN members. According to our modelling exercise, the creation of a partial ASEAN CU with a positive CET of between 2-5 percent demonstrates that while there may be net benefits for ASEAN as a whole, some members may not gain from it. A CET of 0 percent shows that ASEAN-9 members overall will gain in terms of GDP, while Singapore will experience a
negative GDP growth due to potential intra-regional trade diversion. However, the modelling does not capture Singapore’s entrepot trade characteristics and comprehensive
nature of trade agreements that may affect the results positively. Promoting deeper regional integration like the ASEAN CU also entails significant challenges in terms of: tariff peaks and divergence; gaps in beyond-the-border and
regulatory measures; a trade diversion risk for Singapore; as well as political economy challenges due to ASEAN’s unique characteristics and differing levels in economic development. Despite the challenges, an ASEAN CU with more unifying and coherent commercial policies could be considered by ASEAN leaders post-2015. It could be visualised as a form of deeper integration that will not only help strengthen ASEAN’s single market objective, but also further the organisation’s strategic objectives.
the most important task if ASEAN intends to move towards a single market space in the future. As a strategic project, the AEC is conceived to help member states pursue their national interests. Economic cohesion is expected to help the 10 small economies during times of economic vulnerabilities, to deliver on a bigger market space of 600 million people to attract FDI, and to play the role of a ‘hub’ in the larger Asian region. In addition, economic coherence is likely to strengthen the member states’ bargaining power in the WTO and in their collective negotiating position for FTAs and other strategic matters. The AEC’s achievement as a strategic project can be observed in ASEAN states’ increasing level of FDI; cooperative stance during the 2008 crisis; positive behaviour in dealing with the international community; and increasing belief in maintaining centrality. Going forward, the AEC process will continue, not just for its economic benefits of
lowering trade and investment costs in the region, but also for managing ongoing economic and geopolitical uncertainties.
agencies. In the domestic economy, the AEC also generates proponents and opponents of integration, slowing down the pace of implementation further. AEC is not the sole cause of increasing competition. For any single country, heightened
competition is a part of the globalisation process and there are other frameworks too -bilateral, regional and multilateral - that further economic integration. ASEAN economic cooperation is a top-down initiative and hence awareness among
stakeholders is low and uneven. With the looming deadline of 2015, voices from the private sector have begun to be heard. However, the advocacy for trade initiatives is not unanimous in nature and is often driven by the relative strength of particular firms that bring in more foreign direct investment to the country. AEC should be seen in conjunction with the ASEAN Political-Security Community and ASEAN Socio-Cultural Community. As a result, it should not be seen in isolation when
judging whether ASEAN can deliver on its community-building commitments.
• The new vision needs to address cross-cutting issues such as good governance, stronger institutions, and a transparent economic scorecard. In delivering on its promises by 2025, ASEAN should be able to build up on its credibility and maintain its centrality in the FTA structure of the Asia-Pacific in the long run.
Books by Sanchita Basu Das
This book sets outs the conceptual underpinnings of the Middle-Income Trap and explores the various ways it can be defined. It also focuses on the debate surrounding the Middle-Income Trap which questions the appropriate institutional and policy settings for middle-income countries to enable them to continue past the easy phase of economic growth. The book engages with this debate by investigating the role of institutions, human capital, and trade policy in helping countries increase their income levels and by highlighting factors which enable the shift to higher and qualitatively better growth. It questions how the large emerging economies in Asia such as China, Indonesia, and India are currently grappling with the challenges of transitioning from labour-intensive to technology- and knowledge-intensive production, and discusses what can be learnt from the countries that have been able to escape the trap to attain high-income status.
Providing a conceptual framework for the Middle-Income Trap, this book will be of interest to students and scholars of Asian Economics, Comparative Economics and Asian Studies.
average tariffs to less than one per cent for regional trade. Indeed, the tariff related AEC deadlines were met in 2012, when 99.1 per cent of the tariff lines of the ASEAN-6 carried zero per cent duty. However, issues remain over the utilisation rate of Common Effective Preferential Tariff (CEPT) preferences. In 2005-2010, this rate ranged from a low of 0.5 per cent for Myanmar to a modest 22.6 per cent for Thailand
and a high of 47 per cent for the Philippines. In addition, while tariffs have come down, non-tariff barriers (NTBs) continue to prevail in the region. The industries most affected by NTBs are the chemical, machinery, and electrical sectors. These barriers, both at the border and behind-the-border, are used as policy tools by AMCs to protect domestic interest groups. NTBs are most prevalent in Indonesia, followed by Vietnam. The ineffectiveness of NTB reform can be attributed to ASEAN’s way of dealing with the issue – voluntary declaration and the
absence of mechanisms of verification. As a whole, AMCs have collectively benefitted, albeit in a limited way, from its action of tariff reduction and regular discussions on NTBs. In addition,
AMCs’ ‘open regionalism’ has helped integration by creating trade rather than diverting it. As such, ASEAN’s economic regionalism is viewed as a ‘building block’ rather than a ‘stumbling block’ towards the multilateral world trading system. Going forward, key policy recommendations are: generating and maintaining political will for economic integration; generating greater awareness about the pervasiveness and impact of NTBs; streamlining NTBs and harmonising them with existing international databases;
increasing public AMC outreach activities with respect to AEC and its benefits; and pushing for domestic reforms in smaller economies such as Cambodia, Laos, Myanmar, and Vietnam.
of transporting intermediate goods across borders is low in terms of time and money and this can be facilitated with better infrastructure. However, most Asian countries suffer from infrastructure deficiencies. The region, in general, also remains below the world average in terms of quantity and quality of infrastructure. There exist wide gaps among the economies with regard to the trade facilitation and institutional processes.
The 2010 Master Plan of ASEAN Connectivity has focused on infrastructure development, i.e. physical, institutional, and people-to-people connectivity; and similarly, APEC, under Indonesia’s Chairmanship in 2013, has set connectivity as one of its priorities. How these organisations implement the connectivity projects will be keenly watched. This is important as (i) intra-regional economic activities in Asia and the Pacific are likely to increase with time, and (ii) ASEAN and APEC have substantial developmental differences among its member states which offers opportunities for expanding their production networks. ASEAN and APEC are looking for economic integration by 2015 and 2020 respectively,
and this needs to be supported through the building of physical infrastructure, the promoting of trade facilitation and an increase in people-to-people interaction.
there are several sources of infrastructure finance -- Government Budget, Multilateral Development Banks, Commercial Bank Credit, Capital Markets, Sovereign Wealth Funds and Public-Private-Partnership. But each of these
has its own features and certain limitations. While national government budgets will continue to be the mainstay for financing infrastructure, it will need to be supplemented by Multilateral Development Banks in the future. Asian governments must put their collective work to mobilize their large pool of savings for regional infrastructure investments. Strengthening national and regional bond markets—through vehicles like the Asian Bond Market Initiative and the Asian Bond Funds— is one of the few steps in narrowing the infrastructure
financing gap. The Asian region’s forex reserve, including those in
the Sovereign Wealth Funds, could also play an important role.
• Public-Private Partnership may play a bigger role in the near future. What is
needed is substantial work to address the challenges to build and implement
the PPP models. Asian governments need to act together and develop ‘bankable’
projects for attracting the private sector.
seven areas for possible collaboration with ASEAN — supply chain connectivity, trade facilitation, investment, disaster management, structural reform, food security and SMEs. But challenges persist. ASEAN wants to ensure its pivotal role in regional economic integration but feels threatened by the US policy to promote APEC or TPP. Moreover, at this moment, ASEAN’s participation in APEC is limited because three of its members — Myanmar, Cambodia, and Laos — are not part of APEC. With uncertainty in the West, cooperation in Asia is likely to gain importance. Cooperation amongst Asian neighbours can play the role of ‘bridge builder’ between individual Asian economies with the rest of the world. This can reduce disparities in income and have positive spillover effects for technological development, energy security, disaster preparedness and other critical areas.
positive CET minus Singapore. The latter would however mean that the customs union would only be a partial one. The trend in ASEAN’s intra-regional tariff protection suggests that while member countries have achieved a free trade agreement, the grouping’s move towards a customs union will require
them to eventually implement a low positive CET for non-ASEAN members. According to our modelling exercise, the creation of a partial ASEAN CU with a positive CET of between 2-5 percent demonstrates that while there may be net benefits for ASEAN as a whole, some members may not gain from it. A CET of 0 percent shows that ASEAN-9 members overall will gain in terms of GDP, while Singapore will experience a
negative GDP growth due to potential intra-regional trade diversion. However, the modelling does not capture Singapore’s entrepot trade characteristics and comprehensive
nature of trade agreements that may affect the results positively. Promoting deeper regional integration like the ASEAN CU also entails significant challenges in terms of: tariff peaks and divergence; gaps in beyond-the-border and
regulatory measures; a trade diversion risk for Singapore; as well as political economy challenges due to ASEAN’s unique characteristics and differing levels in economic development. Despite the challenges, an ASEAN CU with more unifying and coherent commercial policies could be considered by ASEAN leaders post-2015. It could be visualised as a form of deeper integration that will not only help strengthen ASEAN’s single market objective, but also further the organisation’s strategic objectives.
the most important task if ASEAN intends to move towards a single market space in the future. As a strategic project, the AEC is conceived to help member states pursue their national interests. Economic cohesion is expected to help the 10 small economies during times of economic vulnerabilities, to deliver on a bigger market space of 600 million people to attract FDI, and to play the role of a ‘hub’ in the larger Asian region. In addition, economic coherence is likely to strengthen the member states’ bargaining power in the WTO and in their collective negotiating position for FTAs and other strategic matters. The AEC’s achievement as a strategic project can be observed in ASEAN states’ increasing level of FDI; cooperative stance during the 2008 crisis; positive behaviour in dealing with the international community; and increasing belief in maintaining centrality. Going forward, the AEC process will continue, not just for its economic benefits of
lowering trade and investment costs in the region, but also for managing ongoing economic and geopolitical uncertainties.
agencies. In the domestic economy, the AEC also generates proponents and opponents of integration, slowing down the pace of implementation further. AEC is not the sole cause of increasing competition. For any single country, heightened
competition is a part of the globalisation process and there are other frameworks too -bilateral, regional and multilateral - that further economic integration. ASEAN economic cooperation is a top-down initiative and hence awareness among
stakeholders is low and uneven. With the looming deadline of 2015, voices from the private sector have begun to be heard. However, the advocacy for trade initiatives is not unanimous in nature and is often driven by the relative strength of particular firms that bring in more foreign direct investment to the country. AEC should be seen in conjunction with the ASEAN Political-Security Community and ASEAN Socio-Cultural Community. As a result, it should not be seen in isolation when
judging whether ASEAN can deliver on its community-building commitments.
• The new vision needs to address cross-cutting issues such as good governance, stronger institutions, and a transparent economic scorecard. In delivering on its promises by 2025, ASEAN should be able to build up on its credibility and maintain its centrality in the FTA structure of the Asia-Pacific in the long run.
This book sets outs the conceptual underpinnings of the Middle-Income Trap and explores the various ways it can be defined. It also focuses on the debate surrounding the Middle-Income Trap which questions the appropriate institutional and policy settings for middle-income countries to enable them to continue past the easy phase of economic growth. The book engages with this debate by investigating the role of institutions, human capital, and trade policy in helping countries increase their income levels and by highlighting factors which enable the shift to higher and qualitatively better growth. It questions how the large emerging economies in Asia such as China, Indonesia, and India are currently grappling with the challenges of transitioning from labour-intensive to technology- and knowledge-intensive production, and discusses what can be learnt from the countries that have been able to escape the trap to attain high-income status.
Providing a conceptual framework for the Middle-Income Trap, this book will be of interest to students and scholars of Asian Economics, Comparative Economics and Asian Studies.